TAX reform has been a major source of public debate in Australia for decades and the battles over the Gillard government’s push for a carbon tax and mineral resource rent tax have shown how fiery things can get.
TAX reform has been a major source of public debate in Australia for decades and the battles over the Gillard government’s push for a carbon tax and mineral resource rent tax have shown how fiery things can get.
Political commentator David Black says the most prominent change to the nation’s taxation was the shift in control over income tax from state governments to the Commonwealth.
“1942 transformed the situation, it made the commonwealth the one that collects most of the money and, of course, everything that has happened since then only reinforces that,” said Mr Black, who is the historical consultant at the John Curtin Prime Ministerial Library at Curtin University.
He pointed to the introduction of the GST in 2000 by John Howard as an example and said the money raised might go to the states but it was still controlled by Canberra.
Comparing the carbon tax – the details of which are due to be unveiled by Prime Minister Julia Gillard at the weekend – and the MRRT to the GST, Mr Black said the complexity of the debate surrounding a carbon tax was its distinguishing trait.
“The GST was in a context where people were dealing with the familiar,” he said. “The difference with this (carbon tax) is the issue isn’t just about how much you have to pay and who is going to pay it … it is the whole rationale about why you are having the tax in the first place.”
Accounting firm BDO partner John Murray said the way the carbon tax had been sold by the government also distinguished it from other reforms.
Mr Murray said that when Mr Howard moved to implement the GST, treasury and government worked together closely to consult industry, another major difference.
“There is generally a perceived lack of consultation and the MRRT is probably the shining example of that,” he said.
“The process the government used on the MRRT, it is fair to say, leaves a lot to be desired.”
The capital gains and fringe benefits taxes are also an important mark in the history of tax reform and shows how their effects can lag for decades.
“Capital gains tax was a far-reaching tax which still obviously applies to transactions today,” Mr Murray said.
“Treasury chronically underestimated the taxes that would be raised for capital gains tax. There was certainly a backlash when FBT was introduced, because it fundamentally involves a tax relating to employees, but paid by employers.
“For the first time in history you had this strange result where the person who gets the benefit is not subject to the tax.
“There was certainly a hue and cry about that but over time, the public has digested the tax and absorbed it.”
Mr Black said it would be interesting to see how the Tony Abbott-led opposition’s strong stance against the carbon tax would hold up, with an election still at least two years away.
“Presuming it becomes law in the second half of this year, the interesting question will be, what does time do? Does it simply get settled in?” he said.
“The odds are, it won’t be tested in a poll until August 2013 and it will be difficult for a coalition government to then remove it in the short term without a double dissolution.”